Spain sells bonds at high interest rates

Spain's borrowing costs remained high on Thursday as the treasury sold 2.98 billion euros (3.7 billion dollars) of government bonds at rising interest rates, dpa reported. The sale was slightly below the maximum target of 3 billion euros. Two- and five-year bonds fetched yields of 5.2 and 6.5 per cent, up from 4.3 per cent and 6.07 per cent in the previous auction in June. Seven-year bonds had a yield of 6.7 per cent. On Tuesday, Spain sold one-year and 18-month bonds at declining interest rates, following the announcement of a drastic austerity package. But the reprieve was short-lived. The yield on 10-year bonds went up to the critical 7-per-cent level after the bond sale on Thursday. The spread measuring the difference with benchmark German bonds came close to 580 basis points. Parliament was on Thursday due to approve an austerity package worth 56 billion euros. It includes a rise in value added tax, scrapping civil servants' Christmas bonuses and tax rebates for mortgage holders, and reducing in unemployment benefits. Trade unions plan nationwide protests on Thursday against the cuts.